Gift Inter Vivos

What Is Gift Inter Vivos?

A gift inter vivos, which means a gift between the living in Latin, is a legal term that refers to a transfer or gift made during the life of the grantor. Inter vivos gifts, which includes property related to an estate, are not subject to probate taxes since they are not part of the donor's estate at death. An inter vivos transfer is one made during the grantor's lifetime.

Gifts that exceed $16,000 per year (as of 2022) are subject to gift taxes if they are made to someone other than a spouse or qualified charity. The actual value of the gifted property is calculated at the time of the transfer. The person receiving the gift does not need to report the gift to the IRS or pay income tax on it, but the giver of the gift must pay gift taxes on it if it exceeds the $16,000 threshold.

However, there is a lifetime exclusion for the giver before gift taxes actually kick in, adjusted annually for inflation. As of 2022, an individual can give $12.06 million in their lifetime without incurring any gift taxes.

Key Takeaways

  • In Latin, gift inter vivos means gift between the living.
  • Gifts inter vivos are transferred while the grantor is alive.
  • These gifts are not subject to probate taxes because they are not part of the estate when the donor dies.

Understanding Gift Inter Vivos

A gift inter vivos is a useful estate planning strategy for several reasons. In addition to avoiding probate taxes, if given as a donation to a charitable foundation, the person making the gift can use the value amount as a tax credit on their tax return.

Also, many people give inter vivos gifts simply because they want to oversee the gift during their lifetime, unlike gifts that are bequeathed through a will or a trust. Having the flexibility to distribute the property as intended is attractive to many people. There are minimal reporting requirements as well, so a grantor’s property and affairs can retain a measure of confidentiality.

Gifts that exceed $15,000 may be subject to gift tax if not given to a charity.

Making an Inter Vivos Gift

The donor must be of legal capacity and be at least 18 years of age when making the gift. The intent to make a gift should be confirmed in writing and there must be a present and irrevocable transfer of title or right of ownership. A donor cannot intend for the gift to transfer after his death. Delivery should be immediate either physically or symbolically, particularly when the gift involves the transfer of property or something that is physically impractical to deliver.

Following the gift, the person making the gift relinquishes any rights to the property and can not get it back without the permission of the party that received the gift. Any attempt to control the gifted property or derive a benefit from it may result in voiding the tax-exempt nature of the gift, thus putting the legal status of the transfer in question and making it susceptible to tax.

The recipient must accept the gift as well. Should the gift have actual value, the law assumes the recipient will accept it. However, it is customary for the person receiving the gift to indicate their acceptance in writing to avoid any confusion and to formally complete the transaction.

Example of an Inter Vivos Gift

Julia wants her grandson, Mike, to have her family home. Mike has recently married and has a baby on the way, and Julia is interested in moving to her second home in Florida to escape the cold winters. Julia has just retired and is in good health, and she knows Mike could use the property, or the money from the sale of the property, right away to help support his growing family. So, rather than make Mike wait until she dies to inherit her property, she makes Mike an inter vivos gift of the home, after which he has full ownership and can do with it as she pleases. Since Julia will no longer own the home at the time of her death, it will not pass through probate or be subject to estate tax.

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  1. Internal Revenue Service. "What's New — Estate and Gift Tax."

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